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Lecture 4 Decision Making

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  1. Lecture 4 Decision Making The Essence of the Manager’s Job

  2. Outline of the Lecture • The Decision-Making Process • The Manager as Decision Maker

  3. Learning Outcomes • The decision-making process ▲Define decision and decision-making process. ▲ Describe the eight steps in the decision-making process. • The manager as decision maker ▲Discuss the assumptions of rational decision making ▲ Describe the concepts of bounded rationality, satisficing, and escalation of commitment

  4. Learning outcomes ▲ Explain intuitive decision making ▲ Contrast programmed and nonprogrammed decisions ▲ Contrast the 3 decision-making conditions ▲ Explain maximax, maximin, and minimax decision choice approaches ▲ Discuss the 4 decision-making styles ▲ Explain the managerial decision-making model.

  5. Which one do you choose?

  6. The Decision-Making Process • Decision A choice from 2 or more alternatives Decision-making process A set of 8 steps that include identifying a problem, selecting alternative, and evaluating the decision’s effectiveness.

  7. Significance of decision-making *Each use it frequently ,even some are unconsciously *Outcomes are different based on the different choices. *Different level managers and operatives have their own decisions. Can you give an example? ★Decision-making is a process, not just a choice among Alternatives---《老子》第六十四章:“慎终如始,则无败事。”

  8. 瓦匠的故事 • 三个泥瓦匠都在砌墙。有人问第一个泥瓦匠:你在做什么呀?第一个泥瓦匠一脸沮丧地回答:我在砌墙,枯燥的很!第二个泥瓦匠则喜滋滋地回答:我在造房子,这座房子造好了一定很漂亮!第三个泥瓦匠则信心十足地回答:我在搞城市建设,将来我们的这座城市不但漂亮,而且生活在这里的人也一定很幸福。 • 二十年后,第一个瓦匠仍然在垒砖;第二个瓦匠成为当地第一建筑公司董事长,第三个瓦匠成为这个城市的市长。 • 这个故事说明了一个什么问题呢?

  9. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  10. Step1 Identifying a problem(界定问题) • What is problem? • A discrepancy between an existing state and a desired state of affairs.

  11. Some Cautions about problem identification • A problem or a symptom of problem? • Did all discrepancies be considered ? • Is there any pressure on correcting it? • Are there any resources be assigned to solve the problem? • Is the problem subjective?

  12. 鸡贵有自知之明 我不叫太阳 就不会出来 鸡贵有自知之明

  13. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  14. Step2 Identifying Decision Criteria •decision criteria - what’s relevant in making a decision ★Costs that will be incurred (investments required) ★Risks likely to be encountered (chance of failure) ★Outcomes that are desired (growth of the firm): market share/time saving/customer satisfaction

  15. 人 摸 象

  16. 全球幸福指数 GNH(Gross National Happiness国民幸福总值) • 是全球第一个将生态环境因素考虑进幸福程度的指数。 • 该指数不衡量一国或地区有多少资源和财富,或享有多么高的社会福利或人均收入,而是看各国在生态资源利用上是否合理、有效,是否以较少的消耗实现了较大的价值。 • “全球幸福指数”囊括三个方面的信息,包括“生态足迹”度量指标、生活满意程度和人均寿命。其中“生态足迹”度量指数是指在现有消费水平、技术发展和自然资源背景下,一定数目的人口需多少土地才能养活。用生活满意度乘以人均寿命,再除以“生态足迹”度量指标,就得出了“幸福指数”。 • “全球幸福指数”旨在衡量一个国家或地区在尊重有限的自然资源的同时,为人民赢得了多少幸福。

  17. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  18. Step 3 -Allocating Weights to the Criteria Assigning a weight to each item, making them in the correct priority order in the decision making process. Question: How do decision makers know what weight to assign to the decision criteria?

  19. GDP、GNP 与GNH作为标准其权重如何确定? • GDP指标与“幸福指数”的辩证关系:“GDP是唯效率主义或独尊经济指数的发展取向;“幸福指数”关怀则体现了“以人为中心”发展理念的高级层面,标志着人本取向发展观的出现。 • 经济增长只是手段,人的幸福才是目的。 • 当经济发展到一定水平之后,健康的身体、稳定的工作、美满的婚姻、和谐的人际关系等,对于人的幸福程度的影响力不亚于收入的高低、财产的多少等经济因素。

  20. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  21. Step 4 - Developing Alternatives • list the viable alternatives that could resolve the problem without evaluating them • As much as possible

  22. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  23. Step 5 - Analyzing Alternatives • each alternative is evaluated against the criteria2 and 3. • Comparing the weaknesses and strengths of each alternatives

  24. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  25. Step 6 - Selecting an Alternative • Comparing with the results and select the best one from those considered

  26. 抓周的宝宝—The first choice

  27. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  28. Step 7 - Implementing the Alternative • implementation – try to get operatives’ commitment *operatives’participation in decision-making process ★Reassess the environment for any changes

  29. 8 Steps of Decision-Making Process • Identifying a problem(界定问题) • Identification of Decision Criteria(确定决策标准) • Allocation of Weights to Criteria(确定标准的权重) • Development of Alternatives(罗列待选项) • Analysis of Alternatives(分析选项) • Selection of an Alternative(选择) • Implementation of the Alternative(实施所选) • Evaluation of Decision Effectiveness(决策效果评估)

  30. Step 8 - Evaluating Decision Effectiveness • The soundness of the decision is judged by its outcomes. • How effectively was the problem resolved by outcomes resulting from the chosen alternatives? • If the problem was not resolved, what went wrong? • After evaluation, the whole decision process will start over. Question:What if the problem isn’t solved by my decision? Did I make a bad decision?

  31. Practice 三个和尚没水吃 请分别从小和尚、高和尚、和胖和尚的角度进行“不去挑水”的决策过程分析。

  32. Exhibit 6–5 Decisions in the Management Functions

  33. The Manager as Decision Maker How decisions are made: rationality, bounded rationality, and intuition • The types of problems and decisions managers face • Decision-making conditions • Decision-making styles

  34. Assumption of Rationality • Rationality • Managers make consistent, value-maximizing choices with specified constraints. • Assumptions are that decision makers: • Are perfectly rational, fully objective, and logical. • Have carefully defined the problem and identified all viable alternatives. • Have a clear and specific goal • Will select the alternative that maximizes outcomes in the organization’s interests rather than in their personal interests.

  35. Exhibit 6–6 Assumptions of Rationality

  36. Making Decisions (cont’d) • Bounded Rationality • Managers make decisions rationally, but are limited (bounded) by their ability to process information. • Assumptions are that decision makers: • Will not seek out or have knowledge of all alternatives • Will satisfice—choose the first alternative encountered that satisfactorily solves the problem—rather than maximize the outcome of their decision by considering all alternatives and choosing the best.

  37. Influence on decision making • In accordance with reality in decision-making. • Escalation of commitment(承诺升级):an increased commitment to a previous decision despite evidence that it may have been wrong.

  38. 完全理性决策与有限理性决策

  39. Question • Satisficing seems like settling for second best(退而求其次). Is that true? • How to avoid the escalation of commitment?

  40. Role of Intuition - making decisions on the basis of experience and accumulated judgment • does not rely on a systematic or thorough analysis of the problem • generally complements a rational analysis

  41. Exhibit 6–7 What is Intuition?

  42. Credit Card and Rush Shopping

  43. Types of Problems and Decisions(自学) • -Structured Problems Straight forward, familiar, and easily defined problems • -the goal of the decision maker is clear • -the problem is familiar • -and information about the problem is easily defined and complete

  44. Programmed Decisions • –A repetitive decision that can be handled by a routine approach. • -used to address structured problems • -a repetitive decision Question: give us an example.

  45. Three Possible Programmed Decisions •procedure(程序) – a series of interrelated sequential steps used to respond to a structured problem •rule (规定)- An explicit statement of what to do or not to do •policy(政策) -A guidelines or parameters(范围) for decision making -A guide that establishes parameters for making decisions Question: Policies seem kind of wishy-washy(特征模糊). What purpose do they serve?

  46. Unstructured problems and nonprogrammed decisions -UnStructured Problems (非结构性问题)- new, unusual problems for which information is ambiguous or incomplete –Nonprogrammed Decisions (非程序性决策)–a unique decision that requires a custom-made response -used to address unstructured problems •produce a custom-made response •more frequent among higher-level managers

  47. Programmed versus Nonprogrammed Decisions

  48. Exhibit 6–8 Programmed versus Nonprogrammed Decisions

  49. Integration (自学) • at the higher levels of the organization, managers are dealing with poorly structured problems and using non-programmed decisions • at lower levels, managers are dealing with well-structured problems by using programmed decisions • Keep in mind - few decisions in the real world are either fully programmed or non-programmed